To The Moon

JPMorgan’s investment-banking (IB) miss is a useful caution signal, but it does not on its own prove a broad-based collapse in capital markets activity.

1) Does the miss imply a wider slowdown in capital markets?

More “uneven recovery” than “broad slowdown”.

JPM’s miss was product-specific and timing-driven. Reporting indicated the shortfall was materially tied to debt underwriting coming in below what the bank itself had guided, rather than a uniform decline across all capital-markets lines. 

The wider industry backdrop is not signalling a freeze. Dealogic data cited by Reuters showed global investment banking revenue rose about 15% in 2025, with M&A volumes also materially higher year on year. That is inconsistent with a generalised capital-markets slump. 

Trading strength is offsetting slower deal fees at the big banks. JPM’s quarter featured strong markets revenue (trading), even as IB fees were softer, which fits a regime where volatility supports trading while underwriting and advisory recover in fits and starts. 

What to watch next (to confirm “slowdown” vs “lumpiness”)

Debt underwriting pipelines and issuance windows (especially IG and leveraged finance).

Announced M&A that actually closes (financing certainty matters more in higher-for-longer).

Equity issuance appetite (IPOs and follow-ons tend to reopen suddenly, then shut again).

2) In higher-for-longer, can banks defend margins against rising costs?

They can, but it becomes a bank-by-bank execution story. The key is whether falling funding pressure and balance-sheet repricing can outrun expenses.

Why margins can hold up

Deposit costs can ease as competition normalises and more deposits reprice down, helping net interest income (NII). Deloitte’s 2026 outlook notes deposit costs have already been declining, even as NII growth may be more modest. 

Some banks are still printing strong NII in the current set-up: Bank of America just reported record NII and guided to continued growth, suggesting margin defence is feasible for well-positioned franchises. 

System-level data show NIMs had been rising into 2025, indicating that repricing and asset mix can support margins, at least until competitive dynamics shift again. 

Why costs are the tougher battle

Wage inflation, tech spend (including AI), regulatory and compliance burdens are structurally “sticky”.

If loan growth slows or credit costs rise, cost-to-income worsens quickly.

Practical margin defence levers (what management teams actually do)

Keep deposit betas contained (pricing discipline; focus on operational deposits).

Tilt balance sheets towards higher-yielding, shorter-duration assets where prudent.

Grow fee income (payments, wealth/asset management, markets) to dilute expense pressure, which JPM highlighted via strength in markets and payments. 

Tighten expense growth: vendor rationalisation, branch/network optimisation, and selective headcount.

Bottom line

JPM’s IB miss looks more like a choppy reopening of underwriting/advisory than a definitive capital-markets downturn. Margin defence in higher-for-longer is possible, but the winners will be the banks that pair funding-cost relief with strict expense control and durable fee franchises.